"To get rich is glorious." -- Deng Xiaoping. This is perhaps the smartest thing ever uttered by a member of the Communist Party.

Wednesday, August 05, 2009

Transportation funding

Responding in the comments section to economist Ed Glaeser's take-down of high speed rail, train advocates usually fall into at least one of the following camps:

The assumptions behind Glaeser's math are wrong.

The math is right but it doesn't take into account unquantifiable environmental benefits.

The math is right but it doesn't matter since we don't expect auto transportation to be self-sustaining either. Why should rail be held to a different standard?

Glaeser's math seems to be based on fairly conservative assumptions so I don't lend a lot of credence to the first point. With regard to the second it seems that the environmental benefits of rail are not at all clear. In any case the simple solution is to place a tax on pollution so that all forms of transportation compete on an even playing field.

Much more interesting is the third. It's absolutely true that many billions are lavished on our auto transport infrastructure each year. It's also true that motorists pay various licensing fees as well as a fuel tax to help pay for this. But do those taxes and fees cover the cost of the infrastructure construction and maintenance? From what I have been able to gather the answer is it doesn't.

Rather than making an argument for letting high-speed rail to lose money, however, I think it makes a case for increasing the fees we charge motorists and making the system self-sufficient. If you use it, you pay for it. Those of us without cars shouldn't have our tax dollars used to support those who do. Driving and use of the highways is a private benefit that should be paid for privately, primarily through the gas tax.

Now, it is true that although I don't own a car that I derive certain benefits from the road system. Letter and packages I send are more easily delivered. I use the roads when I take a bus. I can rent a car to get places where public transport is impractical. But I don't see how any of this changes anything. If a package is sent me the delivery service will simply charge more if fuel prices are increased, thus the sender will bear the costs. If I use a bus I will simply pay a higher fare, and if I rent a car I will have to pay more to fill it up.

To make this approach workable it should be paired with a lowering of income and sales taxes, which are used to make up the gap between transportation spending and revenue collected by the gas tax.

Where feasible we should have user fees and specific taxes to collect from those that benefit the most from public services.